The board of Willowglen MSC Berhad (KLSE:WILLOW) has announced that it will pay a dividend on the 20th of May, with investors receiving MYR0.015 per share. Based on this payment, the dividend yield on the company's stock will be 4.3%, which is an attractive boost to shareholder returns.
Check out our latest analysis for Willowglen MSC Berhad
Willowglen MSC Berhad's Dividend Is Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Willowglen MSC Berhad's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.
EPS is set to fall by 0.4% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 71%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The last annual payment of MYR0.015 was flat on the annual payment from10 years ago. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
The Dividend's Growth Prospects Are Limited
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Unfortunately, Willowglen MSC Berhad's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
Willowglen MSC Berhad's Dividend Doesn't Look Sustainable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Willowglen MSC Berhad is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 3 warning signs for Willowglen MSC Berhad that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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